Emily Glazer reported that RadioShack’s plans to close 1,100 stores was being held up as it continues to negotiate with its lenders to obtain approval to move ahead. The disagreements over how many stores to close have only complicated the struggling consumer electronics retailer’s turnaround, according to sources.

The story as it appeared on Dow Jones:
April 16, 2014, 3:50 PM EDT: RadioShack Hasn’t Obtained Lender Approval to Close 1,100 Stores — Sources

RadioShack Corp. is mired in negotiations with its lenders over plans to close up to 1,100 stores, complicating the struggling consumer electronics retailer’s turnaround, people familiar with the matter said.

The delay is also intensifying tensions with some lenders, who were surprised by the store-closing plan when it was disclosed publicly on March 4, the people said.

The electronics retailer, which runs about 4,300 stores in the U.S., said at the time it still needed permission from its lenders, adding that its credit agreements only allowed it to close about 200 stores without approval from lead lenders Salus Capital Partners and GE Capital. The company in March said it planned to spend the next month hammering out an agreement with its lenders before choosing a liquidator to wind down the stores.

Meanwhile, it has continued with the store-closing plans but is currently only targeting 200 stores, people familiar with the matter said. Some landlords have agreed to lower rents in efforts to keep some stores open, these people said.

Over the past six weeks, some lenders have traveled to RadioShack’s headquarters in Fort Worth, Texas, and have traded contentious emails with its advisers as the two sides struggle to come to terms on how many stores should be shut, some of these people said. Although it is typical for these types of negotiations to take time, RadioShack’s decision to go public with its plans without lender approval has created additional tension, these people said.

Some of the lenders are exploring whether up to 2,000 stores should close, people familiar with the matter said, though others say that possibility hasn’t become part of negotiations with the company. The company is set to keep the proceeds of any store-closing inventory liquidation, but it is possible the lenders could try to negotiate for part of the proceeds to pay down their loans, some of these people said.

RadioShack, which has struggled to rebound from a sharp decline in sales, is working more closely with restructuring and financing advisers as it negotiates with the lenders, people familiar with the matter said. It secured a new credit line and loan late last year in an effort to shore up the company’s finances and has said it has enough cash and borrowing ability to cover its needs for the year.

RadioShack Chief Executive Joe Magnacca is fighting to trim the sprawling chain and stock his stores with products people want to buy, but time isn’t on the retailer’s side. The company’s revenue declines accelerated last year as competitors slashed their prices and demand for big-ticket products, like the smartphones generally offered at RadioShack stores, softened.

Consumer electronics stores have been among the most vulnerable to online competition and discount chains, which have already killed off rivals including Circuit City, Tweeter Home Entertainment and CompUSA.

The retailer in February poked fun at its outdated image in a Super Bowl ad by bringing in a crowd of throwback characters from the 1980s, including former wrestler Hulk Hogan, actor Erik Estrada and TV alien Alf, who purport to want their store back and proceed to tear out the shelves and haul away products.

Mr. Magnacca, a former Walgreen Co. executive who was hired early last year, outlined a strategy to refurbish stores by overhauling layouts and stocking fewer varieties of the same gadgets, part of a broader effort to improve its perception among younger customers while keeping traditional “do-it-yourself” patrons satisfied.

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